ZURICH/LONDON (Reuters) - UBS UBSN.VX faces a renewed call to break up its investment banking operations and wealth management division at an investor meeting on Thursday, after activist investor Knight Vinke Asset Management demanded a review of the bank’s structure.
New York based Knight Vinke, which owns just less than 1 percent of the Swiss bank, said its investment banking activities between 2007 and 2009 “nearly destroyed” its prized private banking business, which was still reeling from a slew of scandals during financial crisis.
Knight said the union was preventing each division from achieving its full potential.
“Investment banking is a very risky business and these risks pose a serious threat to UBS’ Wealth Management and Swiss Banking franchises,” Knight Vinke board member Eric Knight said in an open letter.
“This is a discussion that is best had when all the businesses are doing well - as is the case today - and the Board needs to be encouraged to act quickly and decisively so as not to lose the opportunity,” he said.
The break-up call is likely to dominate the agenda at the meeting, eclipsing a debate on executive pay and a celebration of strong first quarter results after one of the most turbulent phases in UBS’s history.
But a proposed a $26 million signing-on award for investment bank chief Andrea Orcel is bound to attract criticism.
Former Bundesbank president Axel Weber, who has been chairman of the Swiss bank for the past year, will have the job of handling any opposition. And some of it could be personal, after he pocketed 4 million Swiss francs ($4.3 million) for joining, on top of his basic pay and an award of UBS shares.
Fed up with corporate excess, Swiss voters pushed through some of the strictest controls on executive pay this year, including the introduction of binding shareholder votes on compensation from next year.
“Chairman Weber talks of a new corporate culture and that managers should set an example, but he himself is taking eight million Swiss francs,” retail investor Brigitta Moser-Harder, who has campaigned against UBS bonuses, told Reuters.
Banker pay and bonuses have become hot topics across Europe since the financial crisis, when a string of major banks including UBS had to be bailed out by taxpayers.
Earlier this month, shareholders at Julius Baer BAER.VX rejected the Swiss private bank’s pay plan, while a sizable minority of investors were critical of a move by Credit Suisse CSGN.VX to issue new shares to pay staff bonuses.
A $2.3 billion loss due to a rogue-trading scandal and a record $1.5 billion fine for its part in a global interest rate rigging scandal have singled UBS out for opprobrium.
Last year, over a third of shareholders rejected the bank’s pay plans and only the thinnest of majorities approved the performance of the board and management.
This time round, opposition is likely to be more muted after first-quarter results signaled UBS’s plans to scale back its investment bank and focus on private banking are paying off.
Shareholder advisory group ISS has also recommended backing UBS’s pay plan.
($1 = 0.9290 Swiss francs)
Additional reporting by Steve Slater; Editing by Mark Potter and Jane Merriman